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Why Veeva Systems Inc. Tumbled Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What's happening: Shares in the life sciences cloud-computing firm Veeva Systems(NYSE:VEEV) slid by more than 20% today following the release of fourth quarter and full year financial results that were broadly better than expected.

Why it's happening: Two main stories have the focus of Veeva Systems' investors. First, Veeva Systems' announced acquisition of data and services provider Qforma CrowdLink raises the issue of potential expense headwinds. Second, financial results were shy of some analysts' sky-high whisper numbers, although the company posted solid growth and results that beat Wall Street's average sales and earnings targets across all sell-side analysts.

In the fiscal fourth quarter, Veeva Systems' sales jumped 38.5% from last year to $87 million, outpacing analyst projections for sales of between $84.5 million and $85.5 million. Revenue growth was driven by a 45.6% year-over-year lift in subscription services revenue thanks to a 39% increase in total customers.

Importantly, the company also saw more of its sales drop to the bottom line in the fourth quarter. Veeva Systems reported that its adjusted EPS soared by 71.4% to $0.12, which was $0.03 better than analysts were looking for.

The improving bottom line was driven by a 5.6% improvement in operating margin to 24.3%, supported by both a shift in mix to higher margin subscription revenue and cost controls that reduced spending on SG&A.

Veeva Systems also said that its sales grew 49% year over year to $313.2 million and that its adjusted, fully diluted EPS grew 60.8% to $0.37 in the just completed fiscal 2015.

Additionally, Veeva Systems offered up guidance for fiscal 2016 that includes 30% subscription sales growth and expectations for full-year revenue of between $390 and $395 million. Veeva Systems also thinks that its adjusted EPS will be between $0.43 and $0.45 in fiscal 2016. That guidance is slightly better than what analysts were projecting ahead of today.

Author

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.
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